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Economic Growth Gets a Downgrade

Andrew Nelles

By Michael Rainey

August 13, 2018

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The Congressional Budget Office reduced its estimate for the growth rate of the U.S. economy in 2018 to 3.1 percent, down from its estimate of 3.3. percent in April. The CBO’s estimate for 2019 growth held steady at 2.4 percent.

The main factors currently boosting growth – the tax cuts, a jump in government spending and an increase in private investment – will continue to lift the economy this year, CBO said. But the 4.1 percent surge recorded in the second quarter will moderate as key components – including a jump in agricultural exports and a rebound in consumer spending after winter – fade away or even reverse.

CBO expects the pace of growth to slow next year, “as growth in business investment and government purchases slows.” Rising tariffs and a possible trade war are a wild card that could reduce further growth.

The CBO’s projections are considerably less optimistic than estimates from the Trump administration, which expects the economy to grow at 3 percent or better for years to come. If the CBO is correct, 2018 will be the only year out of the next 10 to see GDP growth at or above 3 percent.